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3 Insider Buy Plays Worth the Risk

3 Insider Buy Plays Worth the Risk

It's been another tough week for U.S. stocks. Despite reassurances that rising consumer prices are "transitory", the market continues to grapple with the notion that a spike in inflation could force the Federal Reserve's hand.

An accommodative Fed was the primary driver of the longest bull market in history that ended in March 2020. Its support during the pandemic is similarly a big reason why the stocks have rallied to record highs. Without this security blanket some are worried the market will head south.

Meanwhile, the assault on high multiple stocks continues to weigh on the Nasdaq. The tech-heavy index is on pace for its fifth straight week in the red which would mark its worst stretch since 2012.

These kind of slumps in the market are scary to some, but exciting to others. Most long-term growth investors fall into the latter category. As high growth stocks get less expensive, they salivate at buy opportunities.

This is exactly what some corporate insiders have been doing. Let's take a look at some of the names that those in the know have been 'buying on the dips'.

From Where Does Summit Therapeutics Get its Financing?

Summit Therapeutics (NASDAQ:SMMT) CEO Robert Duggan wasn't shy about adding to his stake in the biotechnology stock after it retreated from its February 2021 surge. Last week Mr. Duggan bought nearly $60 million worth of Summit Therapeutics at a price of $5.24.

The roughly 11.4 million share purchase brought his position to over 67.6 million shares. With less than 100 million shares outstanding, the CEO now owns approximately 70% of the stock. To say Summit's leader believes in the company would be an understatement.

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The timing of the purchase was curious because it came just days before the company reported first-quarter results. Although the numbers were downright bad (including a $17.5 million loss), investors are hopeful one of Summitt' antibiotic candidates will breakthrough.

Much of Summit's success will depend on Mr. Duggan. Last quarter the CEO provided an additional $55 million in debt funding to bolster the company's cash balance. Talk about a man with the weight of the world on his shoulders!

Is PennyMac Financial a Good Play on Mortgage Activity?

There has been some heavy insider activity in PennyMac Financial Services (NYSE:PFSI) over the last several days. Board member Farhad Nanji has been among the most active.

On March 19th, Mr. Nanji tacked on another 182,798 shares to his indirect interest in the residential mortgage company. The purchase was made through MFN Partners LP, investment firm out of Boston. This brought the partnership's holding to more than 2.35 million shares. The director also owns 170,529 PennyMac shares directly.

The buys were executed when PennyMac was trading around $60. Back in March, the stock climbed above $70 for the first time extending a remarkable rally from its dip below $15 a year prior. The value-oriented MFN Partners apparently still thinks PennyMac is undervalued.

This would be hard to argue. PennyMac is trading at just 4x forward earnings and 1x sales, both of which are well below the mortgage industry average. The mortgage servicer is benefitting from a surge in lending activity in a low-rate environment.

Interestingly, on the same day as the latest MFN Partners buy, PennyMac Chairman and CEO David Spector shaved $1.8 million off his holdings. However, Mr. Spector still owns more than 1 million shares of the company in addition to a boatload of stock options. That's a lot of pennies for investors' thoughts.

Who are the Insiders Buying HC2 Holdings Stock?

Penny stock investors will want to take a look at HC2 Holdings (NYSE:HCHC). Formerly Primus Telecommunications, the company is far more than a telecom group these days. It is a collection of growth-oriented businesses in the construction, life sciences, broadcasting, and telecom industries.

This may seem like an odd mix, but the NYC-based conglomerate can be viewed as a cheap, diversified play on the country's economic resurgence. HC2's first quarter report reflected the underlying strength in the U.S. infrastructure, life sciences, and broadcasting markets. The company recently exited the insurance business to focus on its core infrastructure opportunity tied to the Biden administration's spending plans.

Meanwhile, corporate insiders have entered buy orders. Last week Avrama Glazer bought nearly $800,000 worth of the stock for his irrevocable trust account. This was the third time in less than a month that the Director purchased HC2 shares for the trust. He also has an 18.9 million share indirect interest through Lancer Capital where he is the sole owner.

On the same day, President and CEO Wayne Barr scooped up another 5,000 HC2 shares to bring his holding to 271,219 shares. The market seems to have picked up on the insider buying given HC2's rally since.

Mr. Glazer is most recognized as the Co-Chair and Director of U.K. soccer club Manchester United. He is also a member of the Glazer family who owns the National Football League's Tampa Bay Buccaneers.

So, between the CEO and a Super Bowl winning sports executive, HC2 recent insider buys pack a credible, winning punch.

Companies in This Article:

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Summit Therapeutics (SMMT)$6.82flatN/A-7.75HoldN/A
HC2 (HCHC)$4.30flatN/A-53.75Buy$5.00
PennyMac Financial Services (PFSI)$62.18flat1.29%2.76Buy$80.57
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